The Senate on Wednesday approved President Muhammadu Buhari’s request to raise additional $500 million eurobond from the international capital market to fund the 2016 Budget deficit. The approval was given by the Senate following an Executive Communication from the President that the lawmakers do consider the request of Mr. President C-in-C for the approval of the $500 million, Eurobond in the International Capital Market for the funding of the 2016 Budget Deficit.
Earlier, deputy Senate leader, Senator Bala Ibn Na’allah asked that the Senate should resolved to the Committee of the whole to approve the request because of the urgency of the matter.
In supporting the motion, Senate Minority leader, Senator Godswill Akpabio, said that in spite of non-consultation, he was agreeing to it because of the urgency of the Eurobond to address the problems of the country for the overall interest of Nigeria and Nigerians.
It would be recalled that the Presidency had in February sought the approval of the National Assembly to raise an additional $500 million eurobond from the international capital market.
Vice President Yemi Osinbajo while in acting capacity had in February 22, 2017 in a letter then explained that the fund would be used to finance the total sum of N4.023 trillion budget deficit in the 2016 and 2017 fiscal years respectively.
The letter had read thus, “refer to line items 229 and 244 of the 2016 Federal Government of Nigeria (FGN) Appropriation Act, which provided for a deficit of N2,204.742 billion and new borrowings of N1,818.675 billion respectively.
“The Act also provided for Domestic Borrowing of N1,182.798 billion and external borrowing of N635.877 billion in line items 245 and 246 respectively.
“Following the high oversubscription of the recent USD 1 billion eurobond issuance, we wish to take advantage of favourable market conditions to issue a eurobond debt instrument of USD 500 million to fund the implementation of the 2016 budget, which is still ongoing.
“You may wish to note that in line with the requirement of securities issuances in the ICM, a specific resolution of the National Assembly, as a firm confirmation of the approval of the Legislature for the Federal Government of Nigeria (FGN) to borrow the USD 500 million through the issuance of a eurobond debt instrument in the ICM is required,” the Acting President informed the Parliament.”
The Vice President had assured that the proceeds of the eurobond would be used as funding sources to finance the budget deficit, including capital expenditure projects as specified in the 2016 Appropriation Act.
Giving details on the terms and conditions of the eurobond, Prof. Osinbajo had said: “being a market-based instrument, the terms and conditions of the eurobond may only be determined at the point of issuance.
“It is important to note that the previous issuances of USD 500 million, USD 1 billion (consisting of two tranches of USD 500 million) and USD 1 billion in January 2011, July 2013 and February 2017, respectively, were issued at coupons of 6.75%, 5.125%, 6.375% and 7.875% based on the prevailing market conditions.
“The debt management office and the Federal Government’s appointed Transaction parties to the issue are committed to working assiduously to secure the best terms and conditions for the Federal Republic of Nigeria.”
According to Osinbajo, the Federal Government planned to issue the eurobond between February and March 2017, subject to market conditions, in order to meet the Government’s approved capital expenditure funding plan.